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Running an online business is a fantastic way to work from the comfort of your own home. You may sell goods or services on a website or through a ready-built platform for online trading like Trade Me. Alternatively, more businesses are turning to social media applications like Instagram. An online business gives you tremendous freedom to sell goods whenever and to whoever, no matter the time or physical location. Instead of having a physical store with set opening hours, you can sell your products whenever someone logs onto your trading forum, even if they are not in close physical distance to you. 

Even though your business may exist in cyberspace, you will need to comply with New Zealand law. This article will first outline the different ways your online business can operate. If you decide that your business is best suited to being run as a company, then read on to see how to register your online business to make sure that you are operating legally in New Zealand. 

What Is a Company?

When you create a business, you may be operating as a sole trader, partnership, or company. A sole trader is when you and the business are the same legal entity. You are the business, and the business is you. Alternatively, when you operate under a partnership, multiple people run the business together. You are all technically the business, but often partnerships are legally recorded and finalised. 

A company works slightly differently from a sole trader or a partnership. A company is an entity that is separate from anyone involved in the business. Legally, a company is its own entity. This is why companies are sometimes referred to as limited liability companies. To understand this term, suppose a limited liability company finds itself with large amounts of business debts. In this case, third-party creditors cannot personally sue the company’s directors to pay off the company’s debts. As such, when running a company, your personal assets are protected. This is one of the key benefits of structuring your business as a company. 

Additionally, this means a company can outlast you as an individual, as you can sell your shares or transfer the company. This structure differs from a sole trader business or partnership, where ‘you’ are technically the business or a significant part of it. You are taxed as an individual and are responsible for all the business’s debts. 

Most companies are limited liability companies. However, some companies are unlimited or cooperative companies. Co-operatives are also limited liability companies. Generally, people form co-operatives to provide goods or services to their members who own and control the business. Unlimited companies do not limit a shareholder’s liability for company debts and are, therefore, rare.

Do I Need to Register My Online Business as a Company?

Once you understand how the different business structures work, it is up to you which one you want to run your online business. If you decide that you would like to operate your new business as a company, the next step is to complete some paperwork to ensure that your company is registered. This is because a company is the only business type that is its own legal entity. So, there is a formal registration process. 

You will have different legal obligations if you are operating as a sole trader or a partnership. However, you will not have to register your online business the same way as a company. Keep in mind, though, that you may need to register for different licenses if you operate a business with food or alcohol. Often, this is dependent on your council’s regulations. Therefore, it is crucial to research what you may need to register for based on your location. 

How Do I Register a Company in New Zealand?

If you want to run your online business as a company, you must register with the Companies Office. This process is much more efficient and cost-effective than in other countries. Registering your company will cost around $125 (excl. GST). Likewise, once you submit all the necessary information to the Companies Office, you can be incorporated within the same day. 

You will first need to create an account with the New Zealand Companies Office. This requires you to create a RealMe login for your company. Before anything, you will need to reserve a unique company name. No two companies on the Register can have the same name, so you must make sure your company name is unique. Further, your name also cannot have any offensive words or phrases. Usually, you can receive approval of your company name application within a few hours of submission (provided you submit the request during business hours). 

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Once you have approval of your company name, you have 20 working days to complete the rest of the registration process. This includes submitting all contact details for your company, like a physical address. You will also need to apply to Inland Revenue for an IRD number for your business. 

When registering your company, you will need to declare who is a shareholder and director for your company. You can hold both of these positions if you start a company by yourself. However, if you have business partners and plan to split these roles, registering will finalise these positions, and the responsibilities of each role will bind you.

How Do I Maintain My Company Registration?

Additionally, you will need to provide or confirm certain information to the Companies Office annually. This may include submitting your financial statements. Otherwise, you will simply need to annually confirm that all details showing on the Companies Office register is up-to-date and correct. Throughout the year, you will also be required to update the Companies Office register, including information like:

  • changing of your company address; 
  • adding a director or shareholder; or 
  • changing the number of shares on issue in your company.

Key Takeaways

Running an online business is a fantastic way to sell products more flexibly than a traditional physical store. As a result, an online business can be a more successful business and provide a better work-life balance than a physical business. However, if you would like your online business to operate as a company, you must follow the traditional process of registering with the Companies Office. This registration is a quick and straightforward process but does require you to come up with a unique company name and collect some documents. You will also need to ensure that you uphold your company’s registration by providing the correct documents to the Companies Office annually. 

If you need help understanding your legal obligations for your online business or company, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

Is my business only an online business if I sell through my own website?

No, your business is an online business if most of your trade takes place online. This can be through any forum, including Trade Me or Instagram. 

Am I in trade if I only sell one item on Trade Me?

You are not considered to be “in trade” if you only sell an occasional item online. Frequency is the main criteria when assessing whether or not you are “in trade”. Therefore, you will not need to consider a business structure or tax obligations if you only occasionally sell items. 

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